S&P boosted the outlook on the nation’s long-term and
short-term foreign-currency denominated debt from stable to
positive, it said in a statement today. The long-term rating was
kept at BB+, the highest junk level.

“We may raise the ratings next year on an improved
government revenue structure, a continued diminished reliance on
foreign currency government debt financing, or a lower
government debt burden,” Agost Benard, a Singapore-based
analyst at S&P, said in the statement. “We may also raise the
ratings if institutional and structural reforms lead to improved
investment environment, and thus better growth potential.”

President Benigno Aquino signed into law today higher
tobacco and liquor taxes and may enact legislation providing
free contraceptives to the poor before year-end, achieving what
his predecessors failed to do for more than a decade. Moody’s
Investors Service and Fitch Ratings rate the Philippines a step
below investment grade with a stable outlook.

The $225 billion Asian economy expanded 7.1 percent in the
third quarter, the fastest pace since 2010. The yield on the 25-
year, 6.125 percent peso debt fell 2.5 basis points, halting two
days of gains. The peso fell 0.1 percent to 41.073 per dollar at
the close, according to Tullett Prebon Plc.

The nation’s strengthening external profile supports the
rating, S&P said, citing current account and balance-of-payments
surpluses which have bolstered foreign exchange reserves and
keep financing risk low. The country posted a BOP surplus of
$8.6 billion as of November, surpassing the $6.8 billion central
bank projection for the full year, according to official data.

A high level of public debt and low revenue generation are
constraints to the ratings, S&P said. The company may scale back
the outlook to stable should fiscal consolidation weaken or the
external liquidity position deteriorates, it said.

“We are now only half a step toward formally gaining
investment grade, which the market has already given us,”
Finance Secretary Cesar Purisima said. The outlook upgrade is
“another example that good governance is good economics.”